By Suzanne Barlyn
Feb 24 (Reuters) – Alabama’s securities regulator said he
will issue an alert on Tuesday, cautioning consumers and
investors to stop trading on bitcoin exchanges or adding to
their accounts if they are having trouble redeeming the digital
currency or cashing out.
Joseph Borg, director of the Alabama Securities Commission,
said he decided to issue the alert after reviewing dozens of
complaints from around the United States from consumers who are
unable to withdraw their money from bitcoin exchanges.
The vast majority of the complaints were about Mt. Gox, a
Tokyo-based bitcoin exchange that suspended withdrawals
indefinitely on Feb. 7 after it detected “unusual activity.”
The company is having both “security and
technical challenges,” according to an update on its website
dated Feb. 20.
Some consumers, however, have been trying to get their money
out for as long as four months, Borg said. Their initial
deposits ranged from a few hundred dollars to $100,000, he said.
The figures are a concern because they suggest that smaller,
“Main Street” investors are among those taking chances on the
digital currency, said Borg, former president of the North
American Securities Administrators Association, a group composed
mostly of U.S. securities regulators.
Bitcoin exchanges allow their users to trade bitcoins for
U.S. dollars and other currencies.
Consumer interest in bitcoin grew when online retailer
Overstock.com Inc announced in January that it would
accept the currency for purchases. Borg, who became head of the
Alabama Securities Commission in 1994, is known for organizing
coalitions of regulators from other states in high-profile
enforcement cases.
While Borg’s alert may help to promote consumer awareness
about the risks of trading on bitcoin exchanges, regulating the
marketplace is still far off, he said. Federal agencies will
have to step in because the exchanges are international, Borg
said.
Some states such as Alabama, however, can regulate bitcoin
exchanges as money transmitters, a type of business that
transfers money between businesses and individuals, Borg said.
Any approach would require new regulations, Borg said.
“Because it’s in the virtual world, it’s not something you can
put your hands on.”
Borg’s upcoming alert was reported earlier on Monday by
MarketWatch.
